Would be nice if there were King and Queen NPCs that just roam around the new castle and do little things here and there. I also think the battle arena is in need of a tileset revamp like the one in that picture.
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Maybe even have NPCs that would buy broken swords / shields, etc, or maybe even give them to the Blacksmith, that we helped get a 'house' in Onnet Town. After he upgrades our lantern, he says he has nothing left to give us.
I think it would be cooler to be able to sell it to a King or someone else within the Castle, that way it would be more interesting for him to say something along the lines of giving it to the Blacksmith, so that they can strengthen their defenses with more swords and shields.
I think that would actually be super cool, to have different cities (NPCs) know of one another's existence, and be able to communicate with one another.
Maybe the King could pay you (in Gralats) to deliver these shields and swords to the Blacksmith on his behalf, and then the Blacksmith might reward you with some sort of currency that you can collect to get an upgrade of your weaponry or something along the lines of that. Could definitely be some sort of quest, with limits of course. I feel like this would be an awesome new use for Castle if it's not going to be a tower anymore, but I'm sure you already have what you're doing with it all planned out.